Gov. Paterson signs law to collect cigarette taxes

Dennis Nett / The Post-StandardGov. David Paterson (seated) signed a bill that will allow the state to collect taxes on cigarettes sold at Native American properties. From left Dave Townsend, state Sen. Joe Griffo, assemblyman Bill Magee, state Sen. Michael Nozzolio. assembly person RoAnn Destito, and state Sen. David Velesky behind Destito.

Gov. David Paterson signed a bill in Utica this morning that would enforce the collection of taxes on cigarettes sold at Indian-owned stores.

The bill would require wholesalers to collect the excise taxes up front and pass them on to the state.

"We're just trying to collect taxes on products bought by New York residents," the governor said just after signing the bill in the state office building in Utica. "We don't want to be antagonistic (toward Indian tribes.) It's an attempt to create an environment where New York state starts getting a reasonable amount of taxes from goods sold to New York residents."

Paterson was immediately criticized by the Oneida Indian Nation, which sells cigarettes at its 13-store SavOn convenience store chain and at Turning Stone Resort and Casino.

"None of the State's other efforts to infringe on sovereignty have worked, and there is no reason to believe this will work either," read a statement issued by the Oneida nation's media relations office. "If the state is serious about resolving this issue, it will negotiate with Indian nations rather than constantly attacking them."

Estimates have ranged up to $400 million a year in excise taxes on cigarettes sold at Indian-owned stores across the state. Paterson declined to say how much he thought the new law would bring in, but he cautioned that some estimates may be too high.

Paterson was joined at the podium by Assemblyman Bill Magee, D-Nelson, whose district includes many of the Oneida Indian Nation's SavOn convenience stores. He sponsored the bill in the Assembly to collect the taxes through wholesalers.

"I think it's something we definitely should do because those taxes should be collected," said Magee. "The courts have said they should be collected."

Paterson cited a 1994 U.S. Supreme Court case that said New York had the legal right to collect taxes on products sold to non-Indians at Indian-owned businesses.

Supporters believe collecting the tax would bring the state $400 million a year in revenues at a time when Paterson is projecting budget deficits of tens of billions of dollars over the next few years.

A Paterson aide Sunday declined to confirm or deny that he will sign the bill in Utica today.

Indian tribes see the law as an attack on their sovereignty and financial well-being. The Seneca Indian Nation, which sells more cigarettes than any other New York tribe, last week urged the governor to veto the bill

"We do not appreciate this threat to the livelihood of the nation, or to the 1,000 families who could be drastically affected during the holidays by affirmation of this bill," Seneca Nation President Barry Snyder Sr. said in a statement.

The bill, passed by the Legislature in August, would prohibit manufacturers from selling tobacco products without a state tax stamp to any wholesaler that doesn't certify the cigarettes won't be resold tax-free. The state excise tax is $2.75 per pack.

Similar bills have been passed but not enforced by previous administrations.

The Indian sales taxes have long been one of Albany's most difficult issues. Tribes held violent protests in 1995 when the Gov. George Pataki's administration tried collect the tax on sovereign land. The current legislation would shift the collection from reservations to the manufacturing and wholesale level, a tactic that worked in other states.

Magee said he hopes this points the way for the collection of other taxes owed by Indian nations.

"I think this is a step toward considering collection of taxes on gasoline, diesel fuel and sales taxes," Magee said.

Last week, the Cayugas temporarily shuttered its LakeSide Trading stores in the town of Seneca Falls and Union Springs after state Supreme Court Judge Kenneth R. Fisher ruled against them in their longstanding tax dispute with Cayuga and Seneca counties.

On Tuesday, Fisher said the nation does not have sovereign rights to sell tax-free cigarettes as it had been doing since it opened the two businesses over three years ago. Fisher also ruled the counties can pursue criminal tax-evasion charges against the nation and keep as evidence the 17,600 cartons of cigarettes seized from both stores last month.

District attorneys in both counties said they will present cases to their respective grand juries.

The Cayugas maintain that they have sovereign rights to sell tax-free cigarettes and gas because the land the stores sit on lies in their 64,000-acre ancestral homeland around the north end of Cayuga Lake. They also claim the properties are considered qualified reservations under state tax law, which they said gives them legal rights to sell tax-free cigarettes."We